Indemnification provisions are mainstays of most construction contracts. As a result, all contractors should be aware that the agreements they enter likely impose certain indemnification obligations upon them. But even the most seasoned contractors may not realize that construction contracts are not always the final word on indemnity. Rather, certain indemnification obligations can arise purely as a matter of law, even if the parties’ contract is silent on the issue. This is what is referred to as “common law indemnification,” and it was the subject of the Arizona Court of Appeals’ recent decision in Hatch Development, LLC, et al. v. Sol’s Construction Co., Inc., 240 Ariz. 171 (App. 2016).
It has been several months since I last published a blog entry. My term as the President of the Scottsdale Bar Association and a particularly busy period in my practice have recently left too few hours in the day for blogging. But now that my term has ended, I intend on resuming my regular posts. In light of my time away, I thought it only fitting that this post cover some aspect of delay. I will, therefore, address in this post the often controversial “no-damages-for-delay” clause.
A “cardinal change” has nothing to do with the football team, the baseball team, or, for that matter, the bird. It is, instead, an important legal concept for contractors to understand. Where applicable, the cardinal change doctrine puts limits on the amount of changed work or extra work that can be ordered under the changes clause of a construction contract. I recently dealt with the doctrine in connection with my practice. Here are the basics.
Cardinal Changes Defined.
Not too long ago, I litigated a case that turned on the enforceability of a pay-if-paid clause. The very good attorneys on the other side argued that the clause at issue was enforceable, such that it excused their general contractor client’s failure to pay. I argued, on behalf of my subcontractor client, that the provision was unenforceable. The trial court agreed with me on summary judgment, which led to a very favorable settlement for my client.
So what was wrong with the clause the parties were fighting over? Among other things, I argued that it did not comply with the requirements set forth in L. Harvey Concrete, Inc. v. Agro Const. & Supply Co., 189 Ariz. 178, 939 P.2d 811 (App. 1997). L. Harvey is the seminal Arizona case on pay-if-paid clauses. It holds that pay-if-paid provisions are enforceable if they meet the following three requirements:
Should the construction contract you are about to enter contain an indemnification provision? What about “no-damage-for-delay” or differing site condition clauses? Or how about a waiver of consequential damages? The inclusion and scope of these types of provisions (and countless others) in any particular construction contract are things you should discuss with your attorney. Whether they are necessary or should be agreed to may vary depending on the type of project and the parties involved. There are, however, certain minimum elements that must be in every Arizona construction contract.